A presentation by budget manager Teresa Berkeley-Simmons made the root of the problem clear. The California Public Employee Retirement System (Calpers) assumed annual investment returns of 7.75%. The crash of the Great Recession in 2008 meant that returns in the fiscal year ending June 30, 2009 were negative 24%, producing an annual loss against assumptions of 31.75%. For Berkeley’s city employees, that has produced investment losses of $200 million.

“We can’t grow our way out of this,” Berkeley-Simmons said.

“Even if Calpers gets 7.75% forever now, they have lost $200 million on which we’ll never get 7.75%,” explained City Auditor Ann-Marie Hogan.

City Manager Phil Kamlarz said the money to close the gap has to come from either increased contributions or a reduction in cash available for city services, or some combination of the two. Long term, the gap can be closed by reduced benefits for new employees, but that does little in the short and medium term.

“Rather than cut services, people are asking employees to contribute more,” said Mayor Tom Bates. “That’s the path we have to go down. People will need to start contributing more. It’s unfortunate, but they’re lucky to have a job.” … Continue reading »

The city works on a biennial budget cycle, but the stresses of the current economic crisis have meant that the budget is subjected to regular revision. At the beginning of this year, in the middle of the current two-year cycle, the city had projected a $16 million deficit for the 2011 fiscal year. That would have required … Continue reading »